Easing of rules expected to cement gains for realty sector

Joint development liability to ease land prices, make homes affordable

Bengaluru, February 2

Addressing the concerns of real estate players, the Budget’s relaxation in long-term capital gains and joint development agreements is expected to benefit builders with a reduction in their tax liability. With land prices set to ease, home buyers, especially in the affordable housing sector, will also gain.

For joint property development deals, the liability to pay capital gains tax will arise the year the project is completed. Land-owners need now pay taxes only at the time of completion of the project.

“Promoters of affordable housing projects will benefit as, instead of the earlier time-line of completing their projects within three years, they now have a cushion of two additional years. Also, joint development projects will be beneficial for land owners and land prices may ease,” said Anuj Puri, Chairman & Country Head, JLL India.

M Murali, Managing Director, Shriram Properties, said: “This has been a point of dispute all along. The Budget proposes to change the existing practice and clarifies that the landowner entering into a joint development agreement shall be subject to capital gains tax upon completion of the project. This change is significant and brings much needed clarity. It will also help avoidable litigation related to joint development.”

Shishir Baijal, CMD, Knight Frank India, said: “Changes in taxing joint development agreements will encourage land-owners to partner with developers. The move to reduce the tenure of the long-term capital gain tax from three years to two is welcome.” welcome and will help marketability of real estate as an asset class.”

Investment boost

The government’s attempt to boost investment in the real estate sector are to be lauded, said Brotin Banerjee, MD and CEO, Tata Housing “Joint development agreements will bring more private participation and long-term financing at lower rates will reduce costs of construction for developers.”

JC Sharma, Vice-Chairman and MD, Sobha Ltd, said: “The proposal to consider the carpet area of 30 and 60 sq m instead of built-up area is welcome.”

“Payment of capital gains on joint deals in the year of completion is a good move, said Ashish Puravankara, MD, Puravankara Ltd.